“In light of the policy actions the FOMC has taken to date, as well as the economy’s natural recovery mechanisms, we might have hoped for greater progress by now in returning to maximum employment. Some have taken the lack of progress as evidence that the financial crisis caused structural damage to the economy, rendering the current levels of unemployment impervious to additional monetary accommodation. The literature on this issue is extensive, and I cannot fully review it today. However, following every previous U.S. recession since World War II, the unemployment rate has returned close to its pre-recession level, and, although the recent recession was unusually deep, I see little evidence of substantial structural change in recent years.” [emphasis added]

Note how Mr. Bernanke relies on precedent to defend his point of view. He believes that economic activity will grow just like it has after “every previous U.S. recession since World War II” because unemployment will fall as it always has, even though unemployment remains stubbornly high. Not only does he thereby imply that so-called black-swans – which are rare events – exist, he clearly refuses to believe that we may already be in one. To see the “evidence of substantial structural change” he says is missing, all Mr. Bernanke needs to do is look at the deficit gap so clearly illustrated in the above chart.

It is not the first time Mr. Bernanke has relied on ‘what is supposed to happen’ instead of what is actually happening. The following is from a CNBC interview on July 1, 2005.

“INTERVIEWER: Tell me, what is the worst-case scenario? We have so many economists coming on our air saying ‘Oh, this is a bubble, and it’s going to burst, and this is going to be a real issue for the economy.’ Some say it could even cause a recession at some point. What is the worst-case scenario if in fact we were to see prices come down substantially across the country?

BERNANKE: Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.” [emphasis added]

Just a few months before, Doubleday published The Collapse of the Dollar and How to Profit From It, the book I co-authored with John Rubino. Here is what we said on page 164 after providing our analysis of the housing market: “To put it bluntly, by virtually every measure, today’s housing market is a classic financial bubble.” The housing bubble was apparent not only to John and me, but also the dozens of others who understand the fundamental economic principles of the Austrian School. Apparently, that does not include Mr. Bernanke.

In conclusion, don’t put your faith on the pronouncements of any central planner. Rely instead on your own common sense, which hopefully has been well grounded by insights from parents or grandparents who lived through the collapse of the German Reichsmark, Serbian dinar, Argentine austral or any of dozens of other currency collapses. If you did not have that opportunity to learn from relatives who experienced a currency collapse firsthand, then I recommend that you read Mises, Rothbard and the other Austrian School scholars published at Mises.org.

Once you do, then decide for yourself whether the problem facing the US is cyclical or structural. Common sense and experience are telling me that it is structural.

Sadly, policymakers are doing little if anything about it. So we need to prepare for the consequences. The best way to do that of course is to own physical gold and silver.

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My objective is to share with you my views on gold, which in recent decades has become one of the world’s most misunderstood asset classes. This low level of knowledge about gold creates a wonderful opportunity and competitive edge to everyone who truly understands gold and money.